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[Music] You know, there's just not that many drugstores anymore. Insured, there's Rite Aid and a few others, but for many of us, CVS and Walgreens are probably the only two that we can name. That wasn't the case ten, twenty plus years ago, but the industry has been consolidating, and there's two big ones to come out on top of it by revenue. Walgreens is the 17th largest US company, and CVS is number eight. Can you believe that? They're both bigger than Microsoft, for example. And when we look into it, we could find a bunch of differences, but on the surface, I don't know, they seem pretty similar to me. You have the pharmacy section, the retail section. Maybe Walgreens is a little brighter in my experience, but I'd likely just go to whichever one is closer.
So, let's take a deeper look and see if we could find some of those differences. Focusing on Walgreens, the name comes from Charles Wallgreen, and what an impressive guy. When he was a teenager, he worked at this shoe factory, earning $4 a week. At this factory, he was involved in an accident that caused him to lose part of his finger. Would you believe it or not, it may be the best thing that's ever happened to him. It goes to show that no matter how bad something seems at the time, some good may come of it. The doctor who treated him that day convinced him to get involved in the pharmaceutical industry. He started as an apprentice at his local pharmacy and soon moved to Chicago to study it at a larger scale. In 1897, he became a registered pharmacist, and in 1901, found himself working as a pharmacist in a drugstore owned by a man named Isaac Blood, who conveniently was looking to sell it for $6,000. Charles pulled together $4,000 on his own and borrowed $2,000 from his father, and he was able to buy it. That store is considered the first ever Walgreens. Eight years later, another former employer of his was looking to sell their drugstores, so Charles bought it and turned it into the second ever Walgreens.
Early on, this is the pattern that he followed. He would save up a large percentage of his profits, and when an attractive-looking drugstore was put on the market in the area, he would take advantage of the opportunity. By 1915, fourteen years after taking over the original, there were five of them. To differentiate them from the competitors, he started making his own line of drugs that he was able to sell at lower prices. He also installed a counter in this store where he could buy food and soda. In 1922, he started offering milkshakes at that counter, and he went all in on the idea because he opened multiple ice cream manufacturing plants to a good supply his own brand of ice cream. By 1927, and this strategy was proving to be effective, there are now just over a hundred stores, most of which were in Chicago, but there were a few popping up in other major cities in the Midwest. This is when he decided to abandon his original strategy of reinvesting profits to expand and instead elected to sell it on the stock market and used that money to take things to the next level. Listen to this: within two years of that initial stock offering, they had more than tripled in size, 397 stores in 87 cities. Plus, they added another source of revenue when they started selling their original products to competing drugstores. They were now nearly a $50 million company in 1920s dollars, by the way. Despite dealing with harsh economic conditions, they continued growing throughout the 1930s. In 1934, they opened a revolutionary location in Tampa that was twice as big as their usual stores and was among the first to display the merchandise out in the open, and that's instead of being inside a case or behind the counter.
1939 was a big year throughout Walgreens' 38-year existence. It's Charles Walgreen himself had been president of the company and the one making all the decisions. I'd call them pretty good decisions, too. Over that time, he turned that one Chicago location into almost 500 that were spread across the country. That was the state of the company when Charles Walgreen resigned as president in August of that year due to poor health, and he died four months later. One last thing I want to mention about Charles Walgreen: this company was one of the first to establish an employee pension plan, and the initial funding for that plan was $500,000 provided by Charles Walgreen's life insurance proceeds. And after that, it remained a family company. He was replaced by his son, Charles Walgreen Jr., who had already been involved in the company. He started as an apprentice 14 years earlier when he was still a teenager and had been vice president for the past six years. Now, Charles Walgreen Jr. had a son named Charles Walgreen the third, who took over as president in 1971, who had also already worked for the company for the past 19 years. He remained in charge until 1998, at which point someone outside of the family took over, and from there, the leadership has shifted around quite a bit. But that's pretty impressive for that span of almost a hundred years, Walgreens was run by only three different people, all named Walgreen.
All right, I think I've said the name Walgreen enough for a while. What about CVS? I actually already made a video about CVS. It talks about how big they are and how they got to that point. Plus, I liken CVS and Walgreens to Tito and Michael Jackson, something I doubt you'll see anywhere else. So, if you're interested in that comparison or one a more detailed account, I recommend that. But for now, here's an overview. CVS started much later, in 1963, when Walgreens was already 52 years old. Stanley Goldstein is the main guy here, along with two others, but I get the impression that those two had a lesser role. Much like Walgreens, it started as a single store. CVS stands for Consumer Value Stores. Originally, it wasn't abbreviated or anything, that was their name. Where Walgreens originally provided value to their customers through selling their own products at low prices, along with their delicious sodas and shakes, CVS did it through customer service. They had happy, attentive employees because they paid them well and treated them with respect. Not to say that Walgreens didn't, but CVS was known for it. Remember how Walgreens took eight years to open that second location? Well, not CVS. By their second year, they were already up to 17, and within six years, they were up to 40. That's when Stanley and the group sold CVS to Shoe Show, a shoe company named Melville. As a larger company, Melville used their resources to further expand the chain.
Here's one of the biggest differences between the two chains: acquisitions. CVS is the size that they are today because they started buying all the competing regional chains. Just looking at the list I have from before: People's Drugstores added 490 stores, Revco was another 2,600, Eckerd was 1,200, Phar-Mor, just a few years ago, added another 1,600. The vast majority of their existing stores were obtained through acquisitions. Here's what happened with Walgreens: for their first 100 years of expansion, all the time under the direction of various Charles Walgreens, and even a few years beyond, almost all of Walgreens' growth was done by opening their own stores. There were a few acquisitions here and there, the most notable one probably being the 66 Medi Mart locations in 1986, but nothing like CVS was doing. Starting in 2006, CVS started a line of acquisitions with a different purpose. They were no longer trying to expand the reach with new stores; they were trying to strengthen the ones that they already had by offering different services and conveniences, somewhat of a vertical integration. That was MinuteClinic, Caremark, OmniCare, Aetna. The other video talks more about what those are, and I had a question mark next to it because at that time, it still needed approval from the Department of Justice. Well, it's since been approved and is now part of CVS. Walgreens was forced to respond to this new strategy, and the best way they knew how to was to finally start with their own acquisitions. If you can't beat them, join them, I guess. Some of the notable ones: in 2006, they bought Happy Harry's, 76 drugstores in Delaware. The next year was Option Care, 100 pharmacies across 36 states, as well as Take Care Health Systems, a provider of convenient care clinics. I have to believe that was a response to CVS's recent acquisition of MinuteClinic and a general shift toward healthcare concerns. In 2010, it was Duane Reade, a billion-dollar acquisition of drugstores in New York City. In 2011, it was Drugstore.com, which has since been shut down. In June of 2012, they bought 45% of Alliance Boots for $6.7 billion. It's a massive UK drugstore chain. Then, in August of 2014, they announced that they would buy the remaining 55% for an additional $15.3 billion. The combined company now goes by the name Walgreens Boots Alliance. An interesting note for all the investors watching: they were added as one of the 30 companies that make up the Dow. In 2018, Eckerd was infamously kicked off of it. To wrap up their acquisitions, they tried to buy Rite Aid in 2015, but the deal fell apart. So instead, they ended up acquiring about half of the locations and have actually been shutting a lot of them down. So, after a hundred years of mostly organic growth, CVS finally forced them into this line of acquisitions, and when you combine everything that the two have done, there's not that many other drugstores left.
So, how about some more direct comparisons? In 2018, Walgreens brought in revenue of about $132 billion, and for CVS, it was about $184 billion. And when we look at how these two have compared over the years, it aligns perfectly with what we've already seen. CVS passed Walgreens for the first time in 2007, soon after they started with their new line of acquisitions, which caused Walgreens to pick it up, specifically in 2015, after that Alliance Boots acquisition, but they haven't been able to catch back up. For a number of locations, it gets a little tricky. Walgreens actually has way more, 14,000 compared to 10,000, but almost 5,000 of those Walgreens-owned locations are outside of the US. So for US locations, CVS is a little bit ahead, but Walgreens wins overall. And then here's the chart showing the location growth over the years, and if you look through it, you'll find it supports the same story for both of them. Prescription drugs typically make up 60 to 70 percent of the revenue. For that, Walgreens is believed to have a 17% market share in the US, and CVS is much higher, around 24%. CVS filled over 1.3 billion prescriptions in 2018, and for Walgreens, it was 823 million. Walgreens has more employees, CVS has more debt. Walgreens has 400 clinics, or as CVS has 1,100. There's really too much to compare it. Let me do my best to give a summary. Historically, Walgreens has been much more original, starting back in 1901 and growing the old-fashioned way by shaping the industry through innovative ideas and using those profits to expand the business until their successful public offering. And even after, they continued growing through similar principles and kept it in the family until they found some changes to be necessary. CVS took a different approach early on. They were bought by a very large company that used their existing resources to propel them forward. They went on a decades-long spree of acquiring the competition, and once they caught up to their biggest competitor, they started looking for other ways to strengthen their business. That's when they started to emphasize health and get involved with clinics and pharmacy benefit managers and insurance companies. At that point, Walgreens shifted their methods to sort of mimic what CVS was doing, and that's where we are today.
Let me know in the comments which do you prefer. Like I said, personally, I have a hard time telling them apart. But more importantly, were you surprised to learn that these are two of the largest companies out there? I think Walgreens is bigger than it seems because they now have a lot going on overseas, and CVS is bigger than it seems because they have a lot going on behind the scenes that customers don't typically encounter. I did my best to compare the two, how they took different journeys to get to this point, and how they now differ because of it. I guess it also turned into an account of how these two companies came to dominate their industries. So, any thoughts about any of it? Leave it in the comments. I'd like to hear what you have to say. Thank you for watching. [Music]